The latest European carbon border adjustment mechanism (CBAM) developments, including a response from Eurelectric to a draft EU implementing regulation, point to changes for electricity trade across South-East Europe. The draft addresses carbon prices paid in third countries under CBAM. Once the financial phase is fully operational, electricity exports from non-EU countries into the EU will be influenced by more than wholesale power prices, transmission capacity and balancing costs. Carbon pricing, emissions verification and regulatory documentation are expected to play an equivalent role in cross-border competitiveness.
In the Western Balkans, the shift is described as structural rather than a minor regulatory adjustment. Serbia, Montenegro, Bosnia and Herzegovina, North Macedonia, Albania and Kosovo are linked to EU electricity markets through trade with Croatia, Hungary, Romania, Bulgaria, Greece and Italy. Regional flows have previously been shaped mainly by hydrological conditions, coal availability, renewable generation, interconnector capacity and wholesale price differentials. Under CBAM, exporters are expected to manage carbon-price exposure and compliance risk alongside those factors.
Methodology for carbon-cost calculations and timing of reference prices
A key issue raised in the Eurelectric response concerns how carbon costs would be calculated for electricity. The organisation argues that monthly CBAM reference prices would better reflect trading realities than annual averages because electricity markets operate continuously. The distinction is relevant for exporters in Serbia, Montenegro and Bosnia and Herzegovina. Traders in those markets would need to assess carbon costs before securing transmission capacity, pricing forward contracts or scheduling cross-border deliveries.
The response also warns that delayed carbon-price calculations could increase uncertainty for traders. It further states that this could lead to higher risk premiums for electricity exported from non-EU SEE markets. The timing of carbon-cost assessment is therefore presented as a commercial variable in export planning. This includes decisions made ahead of delivery and contract pricing.
EU-recognised carbon pricing systems and deduction rules
Eurelectric’s response highlights the role of EU-recognised carbon pricing systems under CBAM deduction rules. It says introducing domestic carbon levies alone will not necessarily improve market access if those mechanisms are not recognised for CBAM purposes. The policy challenge is described as requiring reforms that align with EU recognition criteria from the outset. Otherwise, domestic producers could face higher operating costs while continuing to incur CBAM charges at the EU border.
The consequence described is a potential reduction in overall competitiveness for producers that remain subject to both domestic costs and CBAM charges. The issue is framed around how deduction rules interact with national carbon-pricing design. For countries referenced in the response—Serbia, Bosnia and Herzegovina and Montenegro—the compliance approach would therefore affect export outcomes into neighbouring EU markets.
Default emissions factors and plant-specific performance
Another major element identified in the response concerns default emissions factors used under CBAM when plant-level data is not available or not accepted. Coal-intensive systems—including Serbia, Bosnia and Herzegovina, North Macedonia and Kosovo—could face significantly higher CBAM costs unless lower plant-specific emissions can be demonstrated. Montenegro and Albania are described as benefiting from large hydroelectric fleets compared with coal-based generation structures. However, prolonged droughts and increased thermal generation could reduce that relative position during some years.
The default factor issue is presented as one of the defining commercial variables in regional electricity trade under the new framework. It links system fuel mix with the ability to provide evidence on emissions intensity at plant level. For exporters relying on coal-heavy portfolios, the cost outcome would depend on whether plant-specific emissions can be substantiated rather than default values applied.
Emissions documentation requirements across renewable and low-carbon supply
The response indicates that CBAM could separate regional electricity trade into two commercial categories based on emissions information quality. Electricity supported by verified renewable generation or documented low-carbon production is expected to become increasingly attractive to European buyers. Electricity with unclear emissions data or high carbon intensity is expected to trade at a discount. The change would affect regional utilities, independent traders, industrial consumers and long-term electricity purchasing agreements.
In this context, plant-level emissions verification becomes more important for generators across the Western Balkans. Renewable generators, hydroelectric producers and other low-carbon facilities would need to demonstrate the origin of electricity, measured emissions, generation data and contractual allocation. Without robust documentation, EU importers may rely on default emissions values that overstate actual carbon intensity. That would reduce the commercial value of otherwise low-emission electricity exports.
Cross-border balancing netting rules for import-export patterns
The treatment of cross-border balancing and electricity netting is described as significant for Balkan markets where trading patterns vary over time. Many countries alternate between imports and exports depending on seasonal demand, hydrological conditions and renewable generation output. Serbia may import during one trading period while exporting during another. Montenegro, Albania and Bosnia and Herzegovina are also described as adjusting market positions based on water availability.
The response says clear CBAM rules governing import-export netting would be essential to avoid overstating the carbon footprint of electricity used primarily for regional balancing rather than final EU consumption. This implies that how netting is handled could affect reported emissions associated with cross-border flows. The issue is therefore tied directly to operational trading behaviour across multiple periods.
Implications for coal-dependent systems and investment planning
For coal-dependent power systems, the financial consequences are described as potentially increasing over time. Serbia, Bosnia and Herzegovina, North Macedonia and Kosovo cannot assume that exports to the EU will remain commercially attractive under existing market conditions alone. The response links this outcome to whether generation portfolios decarbonise gradually or whether carbon-pricing systems become fully recognised under CBAM. If neither occurs early enough, carbon adjustment costs are expected to reduce export margins.
The same section also connects those costs with broader impacts beyond day-to-day trading margins. It states that carbon adjustment costs could affect investment decisions, asset valuations and long-term generation planning for coal-dependent assets. The implication is that compliance cost trajectories would influence how portfolios are managed over multiple years rather than only short-term contract pricing.
Renewable opportunities highlighted through hydro capacity in Montenegro
Montenegro is cited as illustrating both opportunities and challenges created by the new framework for electricity exports into the EU market area. Its extensive hydroelectric capacity could become a competitive advantage in years with strong water availability. The advantage would depend on credible emissions documentation and transparent electricity tracing practices. Hydrological variability is identified as a factor that could change outcomes across different years.
The response also points to balancing imports and insufficient contractual evidence as potential weaknesses if supporting documentation does not meet EU expectations. For hydro-based exporters like Montenegro, maintaining documentation quality would therefore be linked to both operational conditions and contractual arrangements used for allocation of production attributes.
Serbia’s broader requirements for a national CBAM approach
Serbia’s situation is described as broader because it combines a coal-heavy generation mix with expanding renewable investments alongside an active electricity exchange and substantial industrial exports to the European Union. A comprehensive national CBAM strategy is described as requiring recognised emissions methodologies and transparent carbon-pricing mechanisms. It also lists renewable electricity certification alongside support for low-carbon power purchase agreements.
The response further calls for practical guidance for exporters selling electricity into neighbouring EU markets such as Hungary, Romania, Croatia and Bulgaria. This requirement reflects the need to align export processes with CBAM documentation expectations across multiple cross-border counterparties within the region’s trading corridors.
Renewable PPAs as evidence for embedded-emissions reporting
The commercial value of renewable power purchase agreements (PPAs) is expected to increase considerably under CBAM-related reporting needs described in the response. PPAs are presented as functioning both as instruments for hedging electricity prices and as evidence supporting embedded-emissions reporting under CBAM. Industrial exporters with access to documented renewable electricity are described as strengthening regulatory compliance while improving long-term export competitiveness.
The same section links this effect to an improved investment case for renewable generation across the region referenced in the response. It connects contract structures used by industrial buyers with downstream reporting requirements affecting how low-carbon attributes can be evidenced at export time.
Changes expected for exchanges, grid operators and financing decisions
The response also indicates adaptation needs for regional power exchanges, transmission system operators and financial institutions involved in cross-border trade flows into EU markets. As CBAM risks become embedded in electricity pricing, exchanges and grid operators would require more transparent emissions reporting alongside stronger cross-border data coordination. Banks and investors are also expected to incorporate CBAM exposure into financing decisions.
This financing impact is described as making low-carbon generation projects, storage projects and renewable infrastructure increasingly attractive while raising transition risks for coal-dependent assets referenced in the response context. The changes therefore extend from trading documentation requirements into how capital allocation decisions may be influenced by anticipated compliance exposure over time.